Cash Is King

While we are experiencing massive deflation in the price of commodities and the stock market the dollar has been showing strength. The US Dollar Index values the dollar against a basket of other currencies. What the chart below is telling us is that the value of other counties currencies have declined when compared to the dollar. What it also tells us is that there is a flight to safety out of other currencies. Iceland recently went bankrupt. Other countries may go bankrupt as well. The IMF in an effort to combat a spreading global financial crisis will be supporting the Ukraine and Hungary with emergency loans. The strength in the dollar has led to a drop in the price of oil. Since Russia receives about half of its tax revenue from taxes on oil decreased revenues are impacting the Russian economy. Markets go up and down. The key to wealth building is to know which are going where and why. Click on chart to enlarge.

Market Summary

The melt down continued with all sellers and no buyers. When will we see the bottom? I believe we will see a bear market rally in near future to retrace approximately 50% of the current downtrend that began with the September high. That would bring the S&P500 back to about 1050 or 105 on the SPY based on Fridays low. If we go down further next week that value will be lower.

I have little commentary to add to the table below. It is completely red on a year to date basis. Gold is down the least and emerging markets down the most. Because of margin calls and hedge fund redemptions there has been massive selling which has caused this meltdown. Money managers who are sitting on a mountain of cash are just waiting for buy triggers to put that money back to work. While I believe that will happen before this months end we will just have to wait and see. Click on table to enlarge.

Opportunity In Oil

Looking at the table in the prior post it can be seen that the $OIX index had the best performance last week gaining 7.44%. So if last week was the bottom in the market and if the $OIX had the best performance it has the best relative strength. The $OIX is composed of 10 large oil industry stocks and the table below shows their performance sorted by performance for one week. Click on table to enlarge.

As can be seen APC, Anadarko Petroleum Corp., had the best performance coming in at a very impressive 21.82% gain for the week. With earnings of 2.24 per share it is trading at about 15 times earnings. Yahoo Finance has a one year target estimate of 78.45 per share. This is an example of Buy Low. Click on chart to enlarge.

Market Summary

There is a bright spot in the sea of red ink in the table below. While the performance data in the table below is sorted by YTD (Year To Date) from top to bottom, the weekly column stands out as an island of green in its midst. And what is really interesting is that in that weekly column the $OIX index is the most up while the USO ETF is the most down. I thought these two traveled in the same direction at the same time. Apparently not. Lets hope from the lone week of green good performance we can have an encore with more to follow. Click on table to enlarge.

Market Summary

As can be seen on table below, the year to date (YTD) column is completely red with no category in positive territory. The S&P500 is down nearly 40% which means it needs to go up 80% just to break even for the year. We are extremely oversold and due for a bounce sometime soon. When it comes it could be fast and hard. We will just have to wait and see. Click on table to enlarge.

Market Summary

As can be seen in the table below looking at the YTD (year to date) column all markets are in the red. That is bad. Let’s hope we put in a bottom soon. Click on table to enlarge.